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OSC Staff Comments on Notice-and-Access Issues Affecting OBCA Companies

March-6-2013

Lawyer Jonathan Feldman, Neill May
Area Corporate Finance and Securities

Summary

As outlined in our earlier client Updates, the recent adoption by the Canadian Securities Administrators of notice-and-access rules, the intention of which is to streamline and facilitate electronic communication with shareholders, has spawned a host of technical concerns and uncertainties.

One of the key challenges has been reconciling the notice-and-access rules with the requirements of corporate statutes (shareholder communications by publicly-traded corporations are governed by both corporate and securities laws).  On February 28, 2013, staff of the Ontario Securities Commission (“OSC Staff”) published a notice outlining its views on, among other things, the interaction of the notice-and-access rules with the requirements for delivery of proxy-related materials and financial statements under the Business Corporations Act (Ontario) (the “OBCA”). Notably, OSC Staff did not express its views on how the new notice- and-access rules will interact with corporations governed by the Canada Business Corporations Act (the “CBCA”). Please see our March 1, 2013 client Update, Industry Canada Announces Availability of Exemption for CBCA Issuers Seeking to Adopt New Notice-and-Access System for a discussion on how the new notice-and-access rules will impact CBCA corporations.

Interaction of Notice-and-Access with the OBCA

In the view of OSC Staff, the requirements of the OBCA are not an obstacle to the implementation of the  notice-and-access system. The OBCA imposes obligations on Ontario companies to send certain proxy-related materials to registered shareholders, and to send the company’s annual financial statements to registered shareholders requesting same. However, OSC Staff commented that, in its opinion, the definition of “send” under the OBCA is broad enough to accommodate electronic delivery of documents, including electronic delivery through the procedures contemplated by notice-and-access, and that in fact the statute expressly permits the electronic delivery of documents in accordance with the Electronic Commerce Act, 2000 (the “ECA”). 

Though the ECA provides, among other things, that: (i) posting a document on a website does not in itself constitute electronic delivery, and (ii) a recipient cannot be required to accept a document in electronic form without his or her consent, OSC Staff’s view is that notice-and-access does not run afoul of these provisions since issuers must, in addition to making proxy-related materials available on a website, mail a notice package to shareholders with instructions for accessing the materials online and provide shareholders with an option to request a paper copy of the materials at no charge.

Implications for Issuers

There continue to be questions and uncertainties about the use of the notice-and-access rules.  However, OSC Staff’s views, which reflect only the opinion of OSC Staff and do not have the force of law, represent another helpful step along the path to facilitate the adoption of notice-and-access and to achieve the potential efficiencies that the rules contemplate. 

For more information on notice-and-access, or to determine whether notice-and-access is appropriate for your company at this time, please contact any member of our Corporate Securities Group.